Johannesburg - Specialist pharmacy and health group Dis-Chem on Friday made its much-anticipated JSE main board debut, with its shares opening at R23.26.
When the JSE closed on Friday, Dis-Chem’s share price had slumped 7.65 percent to R21.48. The company had planned to list at between R16.25 and R20.25 a share.
At R18.34 billion, the company’s market capitalisation is substantially lower than that of its listed competitor, Clicks Group, whose market capitalisation on Friday afternoon stood at R28.55bn.
Dis-Chem, which is South Africa’s second-biggest retail chain of chemists by number of stores, on Tuesday last week announced that it had raised R4.4bn through the placement of 236.8 million shares at R18.50 per share.
Dis-Chem said proceeds from the offer would be used to repurchase shares from the existing shareholders and for the repayment of existing debt.
In a note published prior to Dis-Chem’s listing, Sean Ashton, the chief investment officer at Anchor Capital, said R700m would be used to reduce the company’s debt estimated at R2.2bn, while R460m would be for acquisitions.
Following Friday’s listing and the share repurchase, the Saltzman family will own 53 percent of the equity.
Dis-Chem chief executive, Ivan Saltzman and his wife Lynette, founded the company in 1978. Prior to the listing, the Saltzman Family Trust held 66.9 percent of the company.
The company currently has 101 stores in South Africa and two partner stores in Namibia.
“Listing will allow us to advance and improve our strategy, and at the same time ensure that we can continue growing market share across our product offerings, as well as building on the tremendous brand positioning that has been established over the last 38 years,” Ivan Saltzman said shortly after Friday’s JSE debut.
Saltzman said Dis-Chem had more than doubled its store base since 2010 and tripled it since 2008.
Dis-Chem planned to open a further eight stores during the six months to February 28 and at least 18 stores during the financial year to February, 28, 2018.
“At Dis-Chem, we have developed and refined a winning Pharmacy First retail business model, which helps to drive customer footfall and a wide product offering coupled with an ethos of excellent service,” Saltzman said.
Ashton said he anticipated further market share gains in the years ahead, where growth would be driven by maturation of existing stores, as well as a robust new-store pipeline.
“We believe Dis-Chem is poised to sustain strong growth in earnings in the coming years. Not all existing stores have reached maturity. One-third of existing stores have been open for less than four years. So same-store sales should remain strong, driving margin leverage on existing stores,” Ashton said.
Commenting on the group’s plans to open 100 stores over the next five to eight years, he commended return on capital prospects on new stores.
“A typical store should cost R20m and contribute (approximately) R12m in earnings before interest and taxes within four years, with break even coming within one year.”
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